Q: What is ETH2x-FLI?
A: ETH2x-FLI is the first fully collateralized, ERC-20 leverage token to exist on Ethereum. It uses the FLI methodology which you can learn more about here.
The ETH2x-FLI targets a leveraged 2x exposure to Ethereum. Using the FLI methodology means that you no longer need to worry about margin requirements and can save money on gas. Because it is an ERC-20, it is fully interoperable with the rest of the Ethereum ecosystem.
Q: Are leverage tokens derivatives?
A: Leverage tokens launched by the Index Coop using the FLI methodology are not derivatives. They are always fully collateralized by the underlying. It is the first of its kind to exist on Ethereum without being a derivative.
Q: What is the target leverage of ETH2x-FLI? How does it track?
A: The ETH2x-FLI targets a leverage ratio of 2x. You can read more about it here.
Q: Why the FLI methodology?
A: The FLI methodology targets a 2x leverage, but uses a tolerance range to reduce the number of rebalances and thereby increase the gas efficiency which translates into direct savings by the holder.
By being fully collateralized, the FLI will always be redeemable to the underlying assets unlike perpetuals or synthetics.
Q: What are the risks involved?
A: Using leverage comes with its own risks. You can read more about it here.
Q: Where can I buy ETH2x-FLI.
A: You can buy it from the Tokensets website here. Otherwise, you can also buy it directly from Uniswap or wherever a liquidity pool exists.
If you want to mint the token directly, you can follow the guide here.
Q: What are the fees associated with ETH2x-FLI.
A: This Set will have a streaming fee of 1.95% (195 basis points) and a 0.1% minting /redeeming fee.
Here is a comparison of fees with the other most popular options:
Q: Does the ETH2x-FLI have a supply cap?
A: For the initial launch, the ETH2x-FLI will have a guarded roll-out. Supply caps will be lifted by governance as they get hit - similar to Maker DAO’s debt ceilings.
Like traditional leveraged ETF funds, eventually the ETH2x-FLI will be open where customers may buy off the secondary market (exchanges), or directly mint and redeem the token itself.
What happens to the ETH2x-FLI if the price of the ETH goes up/down?
A: Though the answer is somewhat dependent on the timeframe the price shift is occurring, generally if the price goes down x%, the price of ETH2x-FLI will decrease by a little less than 2x%.
This is because the index is rebalancing as the price is decreasing and thus selling as the price goes down. That means that if the price drops and comes back up, the Net Asset Value at the end will be less than the Net Asset Value at the beginning.
You can understand the mechanism here.